MME doesn’t support loopback. It can only record what’s coming into the soundcard. BUT depending on your soundcard/drivers, you may have Stereo Mix or What-U-Hear which also capture/record soundcard output.
can somebody suggest other audio software that functions as intended?
Most likely it’s a Windows setting or something in the hardware, but -
Ocenaudio is free. GoldWave is $60USD for a lifetime license after a fully-functional free trial.